Author: Anonymous-304

1031 like-kind exchanges or tax deferred exchanges have been part of the United States tax code since 1921, yet they continue to be the subject of a number of misconceptions, some of which are addressed below.
Myth: 1031 like-kind exchanges are only for the wealthy
This misconception arises from the visibility that high-profile companies or individuals have when exchanging a large office building or rental property and deferring the tax on the sale of that property. What is being missed is that average everyday people are utilizing like-kind exchanges as well.
A small business owner who owns his 25,000 sq ft warehouse can defer gain on the sale of that space when he uses the proceeds to purchase another building or even a piece of land. An individual who defers tax on selling a small rental property when she buys a replacement property is also taking advantage of Section 1031 of the tax code. These sorts of transactions made by small businesses and middle class investors are frequent, even if they don’t make the headlines.
I had the opportunity to meet a teacher recently in Denver, Colorado who, upon learning about our company, related her own like-kind exchange story. She had purchased a rental home four years ago for a terrific price, and when the market went up, she was able to enter into a contract to sell it for a profit. She was lucky to have a smart accountant who advised her to structure the transaction as an exchange with a qualified intermediary enabling her to reinvest all of the proceeds in another rental, thereby deferring tax on the sale. She did so and has now profited enough to secure a down payment on three rental properties, about which she remarked, “On a teacher’s salary, without 1031s, I would never have been able to own three rentals.”
Myth: A 1031 exchange must be simultaneous
When the tax code was first added in 1921, all exchanges were simultaneous. Over time, the 1031 exchange deadlines, but the 180-day completion period allows for non-simultaneous exchanges. It is even possible, in a stimulate economic growth. They are an